Your income may be fixed in retirement, yet how much you spend could fluctuate dramatically.
The amount of money that goes out each month could have a big impact on how well you live, according to research from J.P. Morgan Asset Management.
The firm analyzed more than 5 million Chase accounts and found that people tend to spend more at the beginning of retirement.
"We see an increase in spending as people prepare for or transition into retirement," said Katherine Roy, chief retirement strategist at J.P. Morgan. "That surge or volatility is much greater than we had thought."
And those behaviors could upend traditional measures for how much you need to have saved, according to J.P. Morgan's research.
Once you reach retirement, you probably expect to seamlessly transition to a steady spending plan.
Yet J.P. Morgan's research finds that's often exactly the opposite of what happens — in the beginning of retirement, at least.
That is because many retirees use that time to adjust to their new lifestyle. And that means plenty of spending — on travel, home renovations and other changes.
"It's really getting used to this new transition and new life stage. It's going to cause spending on categories you might not anticipate," Roy said.
Consequently, your withdrawal strategies should anticipate that you may spend more early on.
Chances are, as you age you will not spend as much money.
But as you project certain constants — such as your weekly grocery bill — you may not have the most accurate calculations.
You likely will not buy the same items as your needs change. What's more, inflation will play a big part in how much you have to spend.
That makes it more likely that your estimates could be off.
As a result, you could wrongly gauge the effects of inflation on your future spending needs.
That could lead you to make the wrong retirement decisions when it comes to whether to keep working, put off spending or invest too aggressively in equities.
A better solution, according to J.P. Morgan, would be to consider your changing needs and inflation on a category-by-category basis, such as for food, housing, transportation and travel.
You should be careful how much equity risk you take on early in retirement so that you do not deplete your savings. Also be aware of the tax consequences of the withdrawals you do make.
Keep in mind, too, that your spending will continue to fluctuate from year to year throughout your retirement as your medical bills increase or unexpected expenses crop up.